This will install the gem dependencies as well in your vendor/gems directory, which we don’t need at all. We need only those gems which are specific to our application.

You don’t need to unpack the gems and check them in to your app, because it doesn’t matter: you’re guaranteeing the same versions are being called regardless of where they are installed, which will likely vary from machine to machine anyways (.bundle/ should not be checked in to the repo) – so why stick another 60-80 MB of files into your repo that you won’t ever be changing or using?

So, there is no way you can localize your gems in a Rails-3 application. There are other ways you can perform in order to better use of bundler gem.

Use specific versions in your Gemfile and run bundle install –deployment on each target system where you need the exact gem versions.

While defining a new gem in Gemfile, assign a path to it. For example:gem 'paperclip', '2.3.15', :path => './vendor/gems/paperclip-2.3.15'
Bundler will assume that it has to get the gem from vendor/gems folder. Once you’re done. run bundle install